Job Order Costing
Chapter 15
PowerPoint Editor:
Beth Kane, MBA, CPA
Wild, Shaw, and Chiappetta
Financial & Managerial Accounting
6th Edition
Copyright © 2016 McGraw-Hill Education. All rights reserved. No
reproduction or distribution without the prior written consent of
McGraw-Hill Education.
15-C1: Job Order Costing
2
19 - 3
Cost Accounting Systems
Process
Costing
Job
Costing
Chapter 20
 Used for production of large, unique, or
high-cost items.
 Built to order rather than mass produced.
 Many costs can be directly traced to each job.
C1
3
19 - 4
Job Order Production
C1
4
19 - 5
Job Order Production Activities
C1
5
15-C2: Job Cost Sheet
6
19 - 7
Job Order Cost Documents
The primary
document for
tracking the costs
associated with a
given job is the
job cost sheet.
C2
7
19 - 8
Job Cost Sheet
C2
8
15-P1: Materials Cost Flows
and Documents
9
19 - 10
Materials Ledger Card
P1
10
19 - 11
Materials Requisition
P1
11
19 - 12
Materials Requisition
P1
12
NEED-TO-KNOW
A manufacturing company purchased $1,200 of materials (on account) for use in production. The company
used $200 of direct materials on Job 1 and $350 of direct materials on Job 2. Prepare journal entries
to record the above transactions.
General Journal
Purchase Raw Materials Inventory
Accounts Payable
Debit
1,200
1,200
Use - DM Work in Process Inventory
Raw Materials Inventory
Raw Materials Inventory
Beg. Inv.
Purchases
550
550
Work in Process Inventory
XXX
1,200
Direct Material
550
Beg. Inv.
Direct Materials
Direct Labor
Factory OH
550
Job 1
Direct Materials
Direct Labor
Factory OH
P1
Credit
Job 2
200
Direct Materials
Direct Labor
Factory OH
350
13
15-P2: Labor Cost Flows and
Documents
14
19 - 15
Labor Cost Flows
P2
15
19 - 16
Labor Time Ticket
P2
16
19 - 17
Labor Time Ticket
Direct labor—traceable to specific jobs
Job B15 . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,000
Job B16 . . . . . . . . . . . . . . . . . . . . . . . . .
800
Job B17 . . . . . . . . . . . . . . . . . . . . . . . . .
1,100
Job B18 . . . . . . . . . . . . . . . . . . . . . . . . .
700
Job B19 . . . . . . . . . . . . . . . . . . . . . . . . .
Total direct labor . . . . . . . . . . . . . . .
P2
600
$4,200
Indirect labor . . . . . . . . . . . . . . . . . . . . . .
1,100
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,300
17
NEED-TO-KNOW
A manufacturing company used $5,400 of direct labor in production activities in May. Of this amount,
$3,100 of direct labor was used on Job A1 and $2,300 of direct labor was used on Job A2. Prepare the
journal entry to record direct labor used.
General Journal
Work in Process Inventory
Factory Wages Payable
Work in Process Inventory
Beginning Inv.
Direct Materials
Direct Labor
Factory OH
P2
Credit
5,400
Factory Wages Payable
5,400
5,400
Job A1
Direct Materials
Direct Labor
Factory OH
Debit
5,400
Job A2
3,100
Direct Materials
Direct Labor
Factory OH
2,300
18
15-P3: Overhead Cost Flows and
Documents
19
19 - 20
Overhead Cost Flows and
Predetermined Overhead Rate
P3
20
19 - 21
Predetermined Overhead Rate
Road Warriors uses a predetermined
overhead rate (POHR) based on direct
labor cost to apply overhead to jobs.
P3
21
19 - 22
Predetermined Overhead Rate
P3
22
NEED-TO-KNOW
A manufacturing company estimates it will incur $240,000 of overhead costs in the next year. The company
allocates overhead using machine hours, and estimates it will use 1,600 machine hours in the next year.
During the month of June, the company used 80 machine hours on Job 1 and 70 machine hours on Job 2.
1. Compute the predetermined overhead rate to be used to apply overhead during the year.
Predetermined Overhead Rate =
Estimated Overhead Costs
Estimated Activity Base
= $150 per machine hour
$240,000
1,600 machine hours
2. Determine how much overhead should be applied to Job 1 and to Job 2 for June.
Machine Hours Used
Job 1
Job 2
Total
80 hours
70 hours
150 hours
x Predetermined OH rate
x $150 per hour
x $150 per hour
x $150 per hour
= OH Applied
= $12,000 OH applied
= $10,500 OH applied
= $22,500 OH applied
3. Prepare the journal entry to record overhead applied for June.
General Journal
Work in Process Inventory
Factory Overhead
P3
Debit
22,500
Credit
22,500
23
19 - 24
RECORDING ACTUAL OVERHEAD
Indirect Material
Indirect Labor
Other
P3
24
19 - 25
RECORDING INDIRECT MATERIALS USED
P3
25
19 - 26
RECORDING INDIRECT LABOR USED
P3
26
19 - 27
RECORDING OTHER OVERHEAD COSTS
P3
27
NEED-TO-KNOW
A manufacturing company used $400 of indirect materials and $2,000 of indirect labor during the month.
The company also incurred $1,200 of depreciation on factory equipment, $500 of depreciation on office
equipment, and $300 of factory utilities. Prepare the journal entry to record actual factory overhead costs
incurred during the month.
General Journal
Factory Overhead
Raw Materials Inventory
Factory Wages Payable
Accumulated Depreciation - Factory Equipment
Utilities Payable
Debit
3,900
Credit
400
2,000
1,200
300
Factory Overhead
Actual OH Incurred
Ind. Materials
Ind. Labor
Fact. Deprec.
Fact. Utilities
P3
OH Applied to Production
400
2,000
1,200
300
3,900
28
19 - 29
Summary of Cost Flows
P3
29
19 - 30
Summary of Cost Flows
P3
30
19 - 31
Summary of Cost Flows
P3
31
19 - 32
Schedule of Cost of Goods
Manufactured
P3
32
19 - 33
Adjusting Factory Overhead
P3
33
15-P4: Underapplied or
Overapplied Overhead
34
19 - 35
Underapplied or Overapplied
Overhead
P4
35
NEED-TO-KNOW
A manufacturing company applied $300,000 of overhead to its jobs during the year. For the independent
scenarios below, prepare the journal entry to adjust over- or underapplied overhead. Assume the adjustment
amounts are not material.
1. Actual overhead costs incurred during the year equal $305,000.
Factory Overhead
Actual OH Incurred
OH Applied to Production
305,000
Underapplied OH
5,000
General Journal
Cost of Goods Sold
Factory Overhead
P4
300,000
Debit
5,000
Credit
5,000
36
NEED-TO-KNOW
A manufacturing company applied $300,000 of overhead to its jobs during the year. For the independent
scenarios below, prepare the journal entry to adjust over- or underapplied overhead. Assume the adjustment
amounts are not material.
2. Actual overhead costs incurred during the year equal $298,500.
Factory Overhead
Actual OH Incurred
OH Applied to Production
298,500
300,000
Overapplied
General Journal
Factory Overhead
Cost of Goods Sold
P4
1,500
Debit
1,500
Credit
1,500
37
19 - 38
Global View
Porsche AG manufactures high-performance cars. Each car is built
according to individual customer specifications. Customers can use
the Internet to place orders for their dream cars. Porsche employs
just-in-time inventory techniques to ensure a flexible production
process that can respond rapidly to customer orders. For a recent
year, Porsche reported €33,781 million in costs of materials and
€9,038 million in personnel costs, which helped generate €57,081
million in revenue.
38
19 - 39
End of Chapter 15
39